As Union County and North Carolina continue to grow, so does the strain on our roads, highways, and transportation systems. Businesses rely on a dependable and interconnected road network to move goods, access talent, and remain competitive. But maintaining and expanding that network requires funding and our traditional funding model is no longer enough.
The Gas Tax Model: A System Under Pressure
Historically, North Carolina has funded road construction and maintenance primarily through the motor fuels tax (gas tax), which accounts for a significant portion of revenue for the state’s Highway Fund and Highway Trust Fund. Notably, North Carolina’s gas tax stands at 40.3 cents per gallon, making it the ninth highest in the nation according to Kiplinger. Despite this relatively high rate, the effectiveness of the gas tax as a funding source is diminishing. As vehicles become more fuel-efficient and the adoption of electric vehicles increases, gas tax revenues have plateaued. The wear and tear on our roads continue to escalate, but the funds generated to maintain them are not keeping pace.
Federal Contributions and Challenges
At the federal level, the Highway Trust Fund is supported by federal gas taxes of 18.4 cents per gallon for gasoline and 24.4 cents for diesel. However, these rates have remained unchanged since 1993, leading to significant shortfalls. To address these gaps, Congress has transferred approximately $157 billion from the general fund since 2008. Federal funds are allocated to states based on formulas considering factors like lane miles and population. For North Carolina, federal contributions constitute roughly 25% of the North Carolina Department of Transportation’s (NCDOT) annual budget.
North Carolina’s Shift Toward a New Model
Recognizing the need for a more sustainable approach, North Carolina has initiated some measures to diversify transportation funding:
- Sales Tax Diversion: As of FY 2024–25, 6% of state sales tax revenue (approximately $600 million) is redirected to the Highway Fund and Highway Trust Fund. This strategy aims to stabilize funding and align transportation investment with broader economic activity.
- Electric Vehicle Fees: To offset the reduced gas tax contributions from EV users, North Carolina imposes an annual registration fee of $140 for electric vehicles and $70 for plug-in hybrids.
Despite these efforts, challenges persist. The allocation of funds across the state can be uneven, and regions like Union County often compete for limited resources.
Implications of the Draft STIP
Adding to these challenges, the latest draft of the State Transportation Improvement Program (STIP), NCDOT’s 10-year plan for funding transportation projects, proposes significant cuts and delays to numerous projects statewide. The STIP outlines the construction funding and scheduling for state transportation projects over a decade and is updated approximately every two years. Delayed and canceled projects underscore the pressing need for a comprehensive and sustainable transportation funding model that can support both maintenance and new construction across the state.
Additionally, the damage caused by Hurricane Helene added further pressure to the system. With an estimated $5 billion in damages to North Carolina’s transportation infrastructure alone, recovery efforts have drawn significant time and resources away from long-term planning and investment.
Why It Matters for Union County
The Union County Chamber’s 2025 Legislative Agenda advocates for a funding model that reflects current realities and supports future growth. A diversified, reliable funding structure is crucial, not only for repairing existing infrastructure but also for expanding road capacity, reducing congestion, and enabling new development. Transportation infrastructure is more than just a means of mobility; it is the backbone of our economy. Delays in freight, extended commutes, and outdated infrastructure can have cascading effects on the business ecosystem.
To delve deeper into these issues, the Chamber will host a Public Policy Luncheon on May 14 at the Union County Agricultural Center. The event is held in partnership with NC GO!, a statewide coalition that advocates for increased funding and improvements in transportation infrastructure. Featuring experts from across the state, this event will explore the policies and investments shaping our transportation future.
Driving the Conversation
This blog continues our infrastructure series, which has previously covered wastewater capacity and broadband investment, critical components of Union County’s growth. Transportation ties these elements together, and as funding models evolve, it’s imperative that Union County’s business community remains integral to the conversation.
Last modified: April 11, 2025
